backOn February 13, 2023, Judge William M. Ray II of the United States District Court for the Northern District of Georgia dismissed a putative securities fraud class action against Deloitte & Touche LLP based on its audits of the 2012–2019 financial statements of The Southern Company, a utility holding company.
Plaintiff brought claims against Deloitte and its parent entity under Section 10(b) of the Securities and Exchange Act and Section 17(a) of the Securities Act, alleging that Deloitte’s audit reports were false and misleading. According to Plaintiff, those reports were false because Southern misstated its financial statements by delaying recognition of losses on the “clean-coal” Kemper power plant operated by one of Southern’s subsidiaries in Mississippi. The court addressed only one of several of Deloitte’s grounds for dismissal of the 10(b) claim—that it was untimely under the 2-year statute of limitations (28 U.S.C. § 1658(b)(1)). The court held that a reasonably diligent plaintiff would have discovered the information on which Plaintiff relied to bring his claim more than two years before Plaintiff filed suit. Although the court acknowledged that, by themselves, a stock price decline or SEC filings disclosing losses may not be sufficient, the court noted that several other purported red flags referenced in the Complaint as bases for the claim were available to Plaintiff, including: testimony provided at a public hearing by a Southern employee; public disclosure of an SEC investigation into the construction project; publication of a New York Times article alleging concealed losses on the project; and a lawsuit filed years ago against Southern based on the same facts. The court also held that there is no private right of action under Section 17(a) of the Securities Act.
The case is Formby v. Deloitte & Touche LLP, No. 1:22-cv-00670-WMR (N.D. Ga. Feb. 13, 2023). Plaintiff is represented by Gordon Ball LLC, Bienert Katzman Littrell Williams LLP, and Warren & Griffin PC. Deloitte is represented by King & Spalding LLP. The order is attached.
